Nature of the Business

Question 1

Business

Answer 1

A business is any individual or group of individuals whose goal is to make a profit by selling
products and/or services.

Question 2

Enterprise

Answer 2

Simply means “a business”. It is used to describe an undertaking or activity with some degree
of difficulty or risk.

Question 3

Entrepreneurship

Answer 3

The practice of identifying a new innovation or opportunity, organizing the financing and other
resources and taking the risks in hope of creating wealth.

Question 4

Entrepreneur

Answer 4

The individual who identifies the opportunity and risk the times and money to start/to organize
this new venture.

Question 5

Barter

Answer 5

The exchange of goods for other goods. This was the first type of trade.

Question 6

Barter was the first form of trade, however it had several drawbacks. What were the drawbacks?

Answer 6

i. ) A double coincidence of wants
ii. ) Rate of Exchange
iii. ) Some goods are not divisible
iv. ) Some goods are bulky and difficult to transport
v. ) Store of value

Question 7

Profit

Answer 7

The money remaining after the cost of production, distribution and taxes have been paid.

Question 8

Loss

Answer 8

The Opposite of profit, when the cost of production and other expenses are greater than the
revenue, this is called “making a Loss”
It means the business is not making enough money.

Question 9

When does a loss occur?

Answer 9

when the total revenue is less than total cost.

Question 10

Trade

Answer 10

Trading means buying and selling.

Question 11

Organization

Answer 11

A group of persons using resources or things that are arranged in a certain way to carry out
specific activities in order to achieve a goal or objective.

Question 12

Economy

Answer 12

A system that allocates or shares scarce resources be deciding what should be produced, how
and for whom.

Question 13

Producer

Answer 13

A Person or business that makes or creates goods and services

Question 14

Consumer

Answer 14

A Person or group that uses goods and services to satisfy wants.

Question 15

Exchange

Answer 15

The giving of one thing and the receiving of another

Question 16

Goods

Answer 16

Tangible (can be seen or touched) things that are made to be sold and are otherwise called
products.

Question 17

Services

Answer 17

Work that is done for another; assistance or benefit given.

Question 18

Market

Answer 18

Any situation in which sellers and buyers meet and communicate in order to exchange goods
and services.

Question 19

Commodity

Answer 19

An item that is traded, usually raw materials such as copper or coffee.

Question 20

Capital

Answer 20

The money or other resources or other things that are used to start a business. The money,
machinery and man-made materials that are used daily in a business.

Question 21

Labour

Answer 21

The physical or mental work of a person. It is another name for human resources.

Question 22

Specialization of Labour

Answer 22

Refers to the division of a task into a number of related parts.

Question 23

Specialization

Answer 23

A form of division of labour in which each individual or firm concentrates its productive efforts
on a single or limited number of activities.

Question 24

Division of Labour

Answer 24

This is splitting up of a main task into several smaller tasks. Division of labour come about as
persons began to maximize their individual skills

Question 25

Advantages of Specialization

Answer 25

• It increases the skills of workers since the same task is repeated and workers learn
  from repetition.
• It increases productivity, less time is used to change from one activity to another
• The costs of production is reduced since a greater number of items are made
• The quantity of a product can also improve since workers are more skilled and the use
  of machines means that quality cannot be dissolved
• Less time is spent on training of workers because only a small part of the skill is
  necessary

Question 26

Disadvantages of Specialization

Answer 26

• The work is monotonous
• The work environment is impersonal since specialization leads to a larger scale
  industries in which workers are no longer close family members
• Workers may lose pride in their job since they are not completing the entire job and
  therefore, cannot fully appreciate the marking of the product
• Since processors require a large amount of capital to purchase the machinery.

Question 27

Levels of Specialization

Answer 27

• Product or occupation
• Process
• Firm
• Industry
• Region
• Nation

Question 28

Direct Satisfaction of Wants

Answer 28

This is where needs are satisfied directly from nature, hardly altering the original state of the
goods by cooking or applying any form of processing

Question 29

How does production leads to the satisfaction of Needs and Wants?

Answer 29

Wants and needs are satisfied by the certain creation of goods and services which have the
abilty to satisfy needs and wants.

Question 30

Money

Answer 30

Is any commodity that is accepted as a measure of value and a medium of exchange.

Question 31

Features of Money

Answer 31

To be accepted as money the commodity must have the following features:

i. The commodity must be acceptable – everyone must be willing to accept it
ii. It must be relatively scarce. In other words, the item must only be available in small
quantities. In this way, the value will be maintained
iii. The commodity must be capable of being divided easily into smaller fractions
iv. It must be homogenous, it must be identical in look, size and weight
v. Since the item must pass from hand to hand, it must be durable
vi. It must be portable, one must be able to carry it around easily

Question 32

Functions of Money

Answer 32

1. Medium of Exchange – Everyone must be willing to accept it in exchange for goods and
   services
2. Standard of Value – The worth of goods and services is measured in money, which sets
   the price of the item.
3. Store of value – Money can be saved and used in the future. It makes saving possible
   and hence brings out investment
4. Means of Defer Payment – Money is used to pay for goods bought on credit
5. Favorable Price Mechanism – It is the Price one is willing to pay to satisfy effectively

Question 33

Types of Money

Coins

Answer 33

Refered to as token money and are legal tender only up to a small amount

Question 34

Bank Notes

Answer 34

These are issued by the central bank in specific denominations
Bank Notes maintain its value in the outside world if the issuing country is able to produce an
export sufficient goods to be able to pay for the value of all imported goods

Question 35

Bank Deposits

Answer 35

The holder of a bank deposit is allowed to draw cheques on his bank account. It is the most
common form of payment used in business today.

Question 36

Near Money

Answer 36

It satisfies the needs for a medium of exchange, but is not legal tender.

Question 37

Bills of Exchange

Answer 37

Is a written order from one person to another. The person who sends it is instructing the
person receiving it to pay a certain sum of money at a specific time in the future.
The person who is sending is called the “drawer”. The person receiving it is called the
“drawee” (who owes the money to the drawer). The drawer may give instructions for the
money to be paid to another person.
Bills of exchange are usually used by persons who are selling goods to others in another
country.

Question 38

Credit Cards

Answer 38

A credit card is a card given by a financial institution to its customers which authorizes that
customer to purchase “on credit.” This card enables the electronic transfer of information and
money.

Question 39

Debit Cards

Answer 39

Also known as a bank card or check card. Is a plastic payment card that provides the
cardholder electronic access to his/her bank account(s) at a financial institution. Some cards
have a stored value which at a payment is made, while most relay a message to the car
holder’s bank to withdraw funds from the payee’s designated bank account.

Question 40

Electronic Transfer

Answer 40

Is payment transferred electronically from one bank account to another. It is very fast and it is
a safe way of making payments.

Question 41

Telebanking & E-commerce

Answer 41

Ecommerce refers to any business transaction that is done through the internet. This may
include the transfer of money as well as information.
Telebanking is a system for conducting banking transactions over telephone lines.